{"id":680,"date":"2020-08-31T20:38:54","date_gmt":"2020-08-31T20:38:54","guid":{"rendered":"https:\/\/blog.stepstonetexas.com\/?p=680"},"modified":"2020-10-01T18:14:48","modified_gmt":"2020-10-01T18:14:48","slug":"can-agent-commissions-be-paid-to-my-llc","status":"publish","type":"post","link":"https:\/\/blog.stepstonetexas.com\/?p=680","title":{"rendered":"Can Agent Commissions be Paid to my LLC?"},"content":{"rendered":"\n<div class=\"wp-block-image\"><figure class=\"alignleft size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/blog.stepstonetexas.com\/wp-content\/uploads\/2020\/06\/writing-check-1239553-1600x1200-1-1024x768.jpg\" alt=\"\" class=\"wp-image-681\" width=\"368\" height=\"276\" srcset=\"https:\/\/blog.stepstonetexas.com\/wp-content\/uploads\/2020\/06\/writing-check-1239553-1600x1200-1-1024x768.jpg 1024w, https:\/\/blog.stepstonetexas.com\/wp-content\/uploads\/2020\/06\/writing-check-1239553-1600x1200-1-300x225.jpg 300w, https:\/\/blog.stepstonetexas.com\/wp-content\/uploads\/2020\/06\/writing-check-1239553-1600x1200-1-768x576.jpg 768w, https:\/\/blog.stepstonetexas.com\/wp-content\/uploads\/2020\/06\/writing-check-1239553-1600x1200-1-1536x1152.jpg 1536w, https:\/\/blog.stepstonetexas.com\/wp-content\/uploads\/2020\/06\/writing-check-1239553-1600x1200-1.jpg 1600w\" sizes=\"auto, (max-width: 368px) 100vw, 368px\" \/><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">Agents often ask me if they can get their commission paid\ndirectly to their LLC entity. The answer is no\u2026 or a complicated yes. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Texas Real Estate Commission rules indicate that a\nbroker is only allowed to pay a commission to a licensed agent or entity. So,\nin general, the answer is No. However, if it\u2019s really important to you it is\npossible to license your entity which would allow for commissions to be paid\ndirectly to your LLC. However, it\u2019s a complicated process with added expenses\nso you will want to consider that choice carefully. <\/p>\n\n\n\n<!--more-->\n\n\n\n<p class=\"wp-block-paragraph\">This is route I chose when I got my license back in 2006.\nSeveral months after I got my real estate license I created my LLC, StepStone Realty,\nand immediately got it licensed as a Texas Real Estate brokerage. From my first-hand\nexperience, I can tell you what to expect as well as the benefits and disadvantages\nof doing so. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">First, the benefits. <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>When you license your LLC it will give you the\nfreedom to brand yourself separate from the brokerage. If you think some day\nyou will want to start your own brokerage this will give you a head start. <\/li><li>There may be some tax benefits to funnel income\ninto an LLC versus receiving 1099\u2019s for your licensed activities. Talk to your\ntax advisor about the potential savings as there is expense associated with\nthis action. <\/li><li>Depending on the agreement you have with the\ndesignated Broker for your LLC you may be able to recruit agents and dictate\nyour own fee schedules since you are now the owner of the brokerage. <\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">But,\nbefore you run to the Secretary of State to file for your new LLC, you should\ncarefully consider the costs and risks associated.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>You will need a Designated Broker for your firm, someone like myself, who is willing to act as your designated broker and take on the risk of the activities of the LLC. They will want to be compensated for this so you are, essentially, still paying a broker fee. Furthermore, the designated broker will have to be added as a member of your LLC on the organization docs. <\/li><li>Your licensing expenses will double as you will have to pay TREC fees and Board fees for both your brokerage license as well as your individual sales persons license. That\u2019s not cheap and can add up!<\/li><li>You will need to have an E&amp;O insurance policy for your brokerage. TREC REQUIRES E&amp;O if the designated broker owns less than 10% of the LLC. Costs for this vary depending on the level of activity but it could be anywhere from $800 to several thousands of dollars per year. <\/li><li>You will be responsible for the business of the brokerage. If you are independent this won\u2019t be too cumbersome but if you start adding agents it can get pretty involved. <\/li><li>Other considerations include general liability insurance, developing a policy and procedure manual, additional tax return preparation for the LLC and potential tax disadvantages in the form of self-employment taxes. <\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">I admit\u2026 I didn\u2019t know what I was getting into when I\ndecided to license StepStone Realty. The expenses were a surprise. However, at\nthat time, an agent could earn a broker\u2019s license after two years\u2019 experience so\nI was able to transition out of this model in a shorter time frame than agents\ncan do so these days. However, once I did get that broker\u2019s license I was off\nand running much quicker than most agents who make the transition from sales\nagents to brokerage owner. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Ultimately, you should have a detailed discussion with your\ntax preparer about the benefits and drawbacks of licensing your LLC. They may\nhave a better, and cheaper, suggestion on how you can funnel those commissions\ninto your LLC without taking on the hassle of licensing your LLC. If you still\nwant to do it\u2026 let\u2019s talk! I\u2019d love to help you build your business! <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Agents often ask me if they can get their commission paid directly to their LLC entity. The answer is no\u2026 or a complicated yes. The Texas Real Estate Commission rules indicate that a broker is only allowed to pay a commission to a licensed agent or entity. So, in general, the answer is No. However, [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-680","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=\/wp\/v2\/posts\/680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=680"}],"version-history":[{"count":2,"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=\/wp\/v2\/posts\/680\/revisions"}],"predecessor-version":[{"id":685,"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=\/wp\/v2\/posts\/680\/revisions\/685"}],"wp:attachment":[{"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.stepstonetexas.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}